The New Jersey Transportation Trust Fund Authority said Friday that it will use a new method to sell bonds competitively that will insure that firms owned by minorities and women can buy the bonds.

By implementing a structure similar to the dutch auctions used by the federal government, the state authority will also be able to remain in compliance with Gov. Jim Florio's order to sell state and state authority debt through competitive sale.

The authority will use the method to sell approximately $55 million of revenue refunding bonds Oct. 5.

"This is a whole new procedure we are experimenting with in New Jersey'," said Robert Lurie, state director of public finance. "This method of selling bonds is not intended to remove negotiated debt, but if it works, it will give issuers another alternative for negotiated sales."

This summer, a number of minority- and woman-owned firms expressed concern that the ban on negotiated sales could deny them an opportunity to participate in New Jersey bond financings.

In many large competitive offerings, smaller and undercapitalized firms, which describes many firms owned by women and minorities, are unable to competitively bid on the bonds because the minimum orders are too large.

To ensure the participation of smaller, woman-owned and minority-owned firms on the upcoming bond issue, the authority decided to set aside 15% of the deal for them, Lurie said.

"We have received complaints in the past that smaller firms were locked out of state deals." Lurie said. "This will give these firms a chance to get these high-quality bonds."

The issue will be sold in two sections, Lurie said. A minimum of 85% of the issue will be sold through a standard dutch auction, he said.

The rest of the bonds available in the auction will depend on the amount of bids received by this Friday at 3 p.m. eastern daylight time on the set-aside portion of the issue, Lurie said.

Of the 15% designated for smaller firms or firms owned by women nd minorities, the first 7% will be allocated to New Jersey-based minority and then other minority firms.

The next 3% will be allocated to New Jersey-based woman-owned and then to other woman-owned firms.

The last 5% of the allocation will be used to satisfy unfilled orders for woman-owned and minority-owned firms and then split among all interested firms.

The minimum order for the set-aside bonds will be $100,000 per maturity and the maximum order will be $250,000.

Since the deal will consist of only four maturities from 1994 through 1997, the most a woman-owned or minority-owned firm could receive is $1 million of bonds.

The bidders for the 15% designation will make their bids without knowing the price of each bond. The price will be determined at the auction.

Once the bids for the 1 5% portion of the sale are submitted, Lurie said the authority will distribute coupon prices and the amount of each maturity for the remaining part of the deal over the Munifacts newswire.

He said this information will be made available next Monday, so firms can decide what to bid, and how much to bid for, by Tuesday.

"The last few bond sales we had, we received only two or three bids," said William Ankner. executive director of the transportation authority. "The market has been clamoring for more competition and we have responded to that."

The dutch auction will be comparable to the one the U.S. government employs on Treasury bond, note, and bill auctions. The maximum average price for the issues will be set by the submitted bids. Firms that bid over that price receive a full allocation, those that bid at the maximum average price receive bonds on a pro rata basis, and those bidding below the average are locked out.

The minimum order for the New Jersey dutch auction will be 500,000.

"This method of sale and this issue is a good test of what Florio's decision to ban negotiated underwritings will mean for the state," Ankner said. "Plus, it may allow us to give some direction to other issuers that are struggling with the question on how to keep smaller firms in deals."

Last April, Florio's administration came under fire for allegedly funneling state bond business to political friends and contributors to the governor. The federal government launched a probe questioning the inclusion of a firm named Armacon Securities in several state bond sales.

Florio's chief of staff, Joseph Salema, was a half-owner in the firm. Although Salema's interest in the firm was reportedly held in a blind trust, he eventually was forced to resign.

Florio said the ban on negotiated underwritings was unrelated to the federal probe and had been in the works for several months prior to the investigation.

Lurie said the governor has not commented on the planned transportation authority financing.

"We really are anxious to see how this goes," Lurie said. "The state and other, issuers may be able to use this method in the future."

The authority's outstanding debt is rated A-plus by Standard & Poor's Corp. and Aa by Moody's Investors Service. The authority has more than $800 million in outstanding debt. The bonds that will be refunded yield 5.40%. 5.60%, 5.80%, and 6%, and mature in 1994 through 1997.

Lurie said there will be more information on the sale available at a meeting Wednesday in Trenton and at Dillon, Read & Co. Thursday in New York City. Dillon Read serves as the authority's financial adviser.

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